Runoff called in Cyprus' presidential election

NICOSIA, Cyprus — Cyprus heads into a runoff presidential election next weekend, with voters called on to select who will lead the country through a severe financial crisis after no candidate won an outright majority in Sunday’s vote.

Nicos Anastasiades, a right-winger who presented himself as the most capable to negotiate a bailout with Cyprus’ European partners and who went into the election a strong favorite, won the first round with just over 45 percent of the vote. But he fell short of the 50 percent plus one vote needed for an outright victory.

In the Feb. 24 runoff, he will face Stavros Malas, a left-winger who has advocated being more assertive in negotiations for bailout loans to limit the severity of austerity measures they require.

Final results Sunday night showed Anastasiades winning 45.46 percent, well ahead of Malas’ 26.91. Independent Giorgos Lallikas was a close third with 24.93 percent, and was eliminated from the running.

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The change in leadership, after unpopular President Dimitris Christofias said he would not seek re-election, comes at a crucial juncture for Cyprus. The other 16 countries that use the euro are expected to decide next month on a financial lifeline for the tiny country of less than a million people.

Many had criticized Christofias and his communist-rooted AKEL party for a shrinking economy and 15 percent jobless rate, as well as having mishandled events that led to a deadly explosion of seized Iranian munitions that wrecked the island’s main power station.

“What we can deduce from this strong election result it that the overwhelming majority of people have expressed their demand today to rid the country of a government run by the AKEL leadership,” Anastasiades told supporters.

Malas said, “Together, we can counter the crisis without having society endure tough policies.” Malas’ support from AKEL is seen as his main liability.

Lillikas avoided saying which candidate he would support.

Cyprus is fast running out of cash to pay its bills, and the new president faces the difficult task of overcoming skepticism from some bailout-weary euro-area countries to secure help.

Cyprus got into trouble after its banks, whose assets are bigger than the country’s entire economy, took huge losses when Greece restructured its debt. The country has already reached a preliminary bailout agreement with its eurozone partners and the International Monetary Fund, and has enacted a raft of spending cuts and tax increases.

But Cyprus’ help request is meeting resistance from some quarters, especially Germany, which says the country’s banks serves as money laundering hubs for Russian oligarchs, or that is too small to matter since it contributes about 0.15 percent to the euro area economy.

Cypriot officials strongly reject the money laundering label and say allowing Cyprus to fall could set back the euro area’s fragile recovery.

The size of the bailout, estimated to be up to (euro) 17 billion ($22.65 billion), is tiny compared to the hundreds of billions given as rescue loans to other troubled European countries such as Greece, Ireland and Portugal. But it is equivalent to Cyprus’ entire economic output, putting into question whether the country would ever be able to pay it back.

“Cyprus needs an adjustment program, a comprehensive one,” Joerg Asmussen, a member of the European Central Bank’s executive board, told Germany’s ARD television Sunday.

It will have to focus on shrinking the banking sector in an orderly way and “financial help will be needed for that, but in order that there can be such a program Cyprus must make efforts in advance — this is not a one-way street,” Asmussen said in the interview, which was broadcast before Sunday’s election results became clear.

Cyprus will need to improve the transparency of its financial sector and taxation system, Asmussen said.

Asked about the election, Asmussen said the ECB needs “an interlocutor with whom we can negotiate on an adjustment program.”

“In order to secure debt sustainability, we will, for example, need far-reaching privatization — the current president had rejected that. Now we will see whether we can negotiate such a program sensibly by the end of March.”

Malas rejects selling state-owned companies.

Anastasiades said he would resist outright privatizations, opting instead for selling a minority stake to a strategic investor.

Both candidates have said they would utilize the prospect of the natural gas riches from newfound offshore deposits to jumpstart the economy, but such potential revenue is still years away.

The financial crisis has overtaken the country’s ethnic division as the primary campaign issue in some 40 years. Cyprus was split into an internationally recognized Greek Cypriot south and a breakaway Turkish Cypriot north in 1974, when Turkish invaded after a coup by supporters of union with Greece. The latest round of reunification talks between Christofias and Turkish Cypriot leader Dervis Eroglu resulted in deadlock.

Turnout in Sunday’s vote stood at 83.14 percent of the 545,491 eligible voters.